How to Lower your Adjusted Gross Income (AGI)

I have learned quite a bit about Adjusted Gross Income since starting to repay my student loans on an income-based repayment plan as a public service employee. Under this plan, I make 120 payments while employed for my government — 10 years — and the remaining balance is forgiven.

Now, don’t be stupid. I’m not a tax professional or qualified in any way to give out tax advice. You have to be smart and check out anything you read anywhere to find out how it might affect you and your finances.

Taking a job in public service and the lower-than-market-rate salary that goes hand-in-hand was scary, but learning how the student loan repayment plan worked was a huge relief because after reading all of the information for the program, one key concept stuck out in my mind: the monthly repayment amount is based on your AGI as reported on your tax return.

AGI, or Adjusted Gross Income.

My first year’s payments weren’t too bad, or so I didn’t think. But getting settled into a new job, I then started contributing the maximum allowed into the retirement plan. Once that was going, I realized there were lots of other expenses where contributions were deducted from my gross pay PRE-TAX. Awesome, right?

After that first year, my next tax return showed a lower AGI as I had started these investments and lowered my take home pay. Pretty soon, I realized that if I stepped up my contributions into other accounts, that too would lower my AGI. Each year, it has become a challenge to see how much I can lower my AGI not only to lower my student loan payment for the next 12 months, but also to qualify for other tax savings, such as the medical deduction.

Aside from my employer retirement plan, I have also used the deferred compensation account to add retirement funds, a Health Savings Account (HSA) which is a fantastic vehicle to save tax-free money, and a traditional IRA. For 2015, I lowered my AGI an additional $2500 compared to last year so I am thrilled to know that my loan payments will go down and qualifying for the medical deduction next year will be even easier.

For me, using the AGI as a benchmark for saving and investing has been a great learning experience. Talk to your tax professional and read up at to see how you can make your AGI work for you to create wealth and maximize your deductions.


p.s. Check out the new NDQ Guide: 500 Tips the guide that will give you actionable steps to jump start your savings and investing immediately.

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